rb investor presentation · • this presentation contains statements with respect to the financial...
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RB investor presentationHalf year 2016
29th July 2016
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Rakesh KapoorChief executive officer
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Disclaimer
Cautionary note concerning forward-looking statements• This presentation contains statements with respect to the financial condition, results of operations and business of RB (the “Group”)
and certain of the plans and objectives of the Group that are forward-looking statements. Words such as ‘intends’, ‘targets’, or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including targets for net revenue, operating margin and cost efficiency, are forward-looking statements. Such statements are not historical facts, nor are they guarantees of future performance.
• By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside the Group’s control. Among otherrisks and uncertainties, the material or principal factors which could cause actual results to differ materially are: the general economic, business, political and social conditions in the key markets in which the Group operates; the ability of the Group to manage regulatory, tax and legal matters, including changes thereto; the reliability of the Group’s technological infrastructure or that of third parties on which the Group relies; interruptions in the Group’s supply chain and disruptions to its production facilities; the reputation of the Group’s global brands; and the recruitment and retention of key management.
• These forward-looking statements speak only as of the date of this announcement. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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Key messages
Health and Hygiene
focus driving growth
Virtuous earnings
model delivering
Full year targetson track
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Health, Hygiene, Home category growth trends have not changed materially
CAGR
Estimated medium term category growth trends – RB categories and markets
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Health & Hygiene driving growth…
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+8%*
+5%*
+10%*
=+Q1 Q2 H1
+5%*+7%*
+3%*
=+Q1 Q2 H1
Category growth CAGR Category growth CAGR
* RB NR LFL growth
Virtuous earnings model fully intact and delivering…
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Grossmargin
Reinvestdrive
Netrevenuegrowth
Fixedcost
Operatingmargin
+240bps(Mix / project fuel / pricing / Supercharge)
+20bps
+180bps
+5% LFL
+40bps(+39m*)*at constant exchange rate
In summaryA strong start
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Net revenue growth (LFL)
Net income growth
Cash conversion
>100%
+5% +12%*Interim
dividend58.2p
*Adjusted net income, at constant exchange rate
Adrian Hennah Chief financial officer
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Q2 & HY 2016 resultsIncome statement
*Adjusted to exclude the impact of exceptional items
Q2 H12016 2015 2016 2015
£m £m £m £mRevenue 2,266 2,140 4,569 4,356LFL % 4% 5% 5% 5%
Gross margin 2,740 2,511Gross margin % 60.0% 57.6%
Adjusted operating profit* 1,081 953Adjusted operating profit %* 23.7% 21.9%
Exceptionals (319) (14)
Operating profit 762 939
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HY 2016 results Income statement
H12016 2015£m £m
Operating profit 762 939
Net finance expense (11) (18)
Profit before taxation 751 921
Taxation (223) (212)
Tax rate – Adjusted 23% 18%
Tax rate 30% 19%
Non-controlling Interest (2) -
Net income 526 709
Adjusted net income* 822 720Diluted EPS 73.4p 97.5pAdjusted diluted EPS 114.7p 99.0p
*Adjusted to exclude the impact of exceptional items and their associated tax effect
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LFL Revenue growth by QuarterBusiness Segment
2015 2016 Total NR
Q1 Q2 Q3 Q4 FY Q1 Q2 HY FY
£m
NA 3% 3% 5% 4% 3% 1% 3% 2% 1,048
Rest of ENA 5% 4% 7% 6% 6% 5% 1% 3% 1,881
ENA 4% 4% 6% 5% 5% 3% 2% 3% 2,929
DvM 6% 8% 10% 12% 9% 10% 8% 9% 1,457
Food 4% 1% 3% 8% 4% 2% 5% 4% 183
Group 5% 5% 7% 7% 6% 5% 4% 5% 4,569
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Revenue growth by QuarterCategory
2015 2016 Total NR
Q1 Q2 Q3 Q4 FY Q1 Q2 HY FY
£m
Health 13% 13% 14% 14% 14% 10% 5% 8% 1,501
Hygiene 3% 3% 4% 4% 3% 3% 7% 5% 1,934
Home -1% 2% 5% 1% 2% 3% -1% 1% 834
Portfolio -3% -6% 5% 10% 1% 1% -8% -3% 300
Group 5% 5% 7% 7% 6% 5% 4% 5% 4,569
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Margin Analysis
Gross Margin H1At actual % bps v PY
2016 60.0% +240bps2015 57.6% +90bps
BEI H1At actual % bps v PY
2016 14.8% +40bps2015 14.4% +30bps
Operating Margin H1At actual % bps v PY
2016 23.7% +180bps2015 21.9% +160bps
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Profitability by business segment
Adjusted to exclude the impact of exceptional items
H1
2016%
2015%
ENA 25.5% 24.2%
DvM 20.0% 16.8%
FOOD 23.5% 25.6%
Group 23.7% 21.9%
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Net Working Capital
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NWCHY16 HY15 FY15
£m £m £m
Inventory 752 707 681% to last 12 month revenue 8% 8% 8%
Receivables 1,377 1,208 1,331% to last 12 month revenue 15% 14% 15%
Payables (3,400) (2,948) (2,948)% to last 12 month revenue -37% -33% -33%
Net working capital (1,271) (1,033) (936)% to last 12 month revenue -14% -12% -11%
Free cash flow
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H1 FY2016 2015 2015
£m £m £m
Adjusted Operating Profit* 1,081 953 2,374Share based payment 33 25 50Depreciation and amortisation 83 85 171Net Capital expenditure (260) (76) (168)Movement in net working capital 286 125 (79)Movement in provisions and other creditors (20) (73) (50)Other non-cash movements in operating profit - (2) (33)Trading cashflow 1,203 1,037 2,265
Exceptional cashflow (14) (62) (98)
Operating Cashflow 1,189 975 2,167
Net interest paid (8) (17) (31)Taxation paid (242) (202) (480)Free Cashflow 939 756 1,656
Free Cashflow as % of Adjusted Net Income 114% 105% 89%
Closing net debt (1,578) (1,793) (1,620)
* Adjusted to exclude the impact of exceptional items
Korea ‘HS’ Issue
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Korea HS Timeline
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2000 2001 2011 2012
c.2000Oxy, an independent Korean manufacturer of household
goods, reformulates Humidifier Sanitiser (HS)
to include PHMG
March 2001RB acquires Oxy
August 2011KCDC* announces link
between HS products and severe respiratory disease
RB withdrawsHS product from market
November 2012KCDC* Committee formed
to review all reported cases of injury
HS product less than 0.5% of total RB Korea sales
2000-2011
* Korean Centre for Disease Control
KCDC Assessments
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Round Total applicants Category I &II RB Oxy users – cat I &II Completion dateactual/target
1 361 172 136 Nov 12
2 169 49 45 Oct 14
3 752
To be determined
Dec 15
4 TBD* Open
* No numbers published for Round 4
Korea HS Timeline
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2012 2014 2016
2014Oxy RB found liable
of civil offence of mislabelling; fined
2016Prosecutor brings criminal charges
against multiple defendants
Q2 2016Oxy RB undertakes consultation on a
Compensation Plan for Round 1&2/Category I&II victims
2014 - Q1 201680% of civil cases brought by victims settled through Court mediation
Korea – Financials
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Impact on trading
Exceptional costs
Contingent liabilities
Rakesh KapoorChief executive officer
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New initiatives for H2 2016
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Scholl® Light Legs
Scholl® Light Legs Compression TightsFor legs that feel great and look great – all day long
Amope® GelActiv Insoles & Inserts
Amope® GelActiv Insoles & InsertsInvisible gel insoles and inserts for all types of female shoes
Superior all day comfort for tired and achy feet
Mega Red® Advanced 4-in-1
Mega Red® Advanced 4-in-1Our strongest Omega-3 supplement. 2X more concentrated Omega-3s vs. standard fish oil
Nurofen® up to 8 Hour Relief range
Nurofen® up to 8 Hour ReliefProvides longer lasting pain relief for up to 8 hours with just one single dose
Available in tablets, patches and gel formats
Mucinex® Clear & Cool
Mucinex® Clear & Cool Clears congestion. Cools with an instant menthol burst!
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Optrex® Night Repair Gel Drops
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Optrex® Night Repair Gel DropsRestores & repairs your eyes while you sleep
Durex® Intense Orgasm Gel & Condom
Durex® Intense Orgasm Gel & CondomJust a few drops of Durex Intense Gel together with the new Durex Intense Condom, to
protect and pleasure even more!
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Veet® Sensitive Precision
Veet® Sensitive Precision Beauty StylerGentleness & precision for sensitive body areas
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Dettol® On-The-Go Sanitiser
Dettol® On-The-Go Hand SanitiserOffering germ protection in an easy to carry format anytime, anywhere!
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Harpic® Bathroom Cleaner
Harpic® Bathroom CleanerFor a perfectly clean & sparkling bathroom
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3737
Air Wick® Pure Essential Oils
Air Wick® Pure Essential Oils FragranceJust fragrance, no wet spray.
Now available with fragrances containing 5 Essential Oils
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Vanish® Gold
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Vanish® Gold Now works even on 7 day dried-in stains!
2016 Targets
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2016: Targets - LFL Net Revenue Target reaffirmed
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Original
+4-5%
New
+4-5%Lower end
2016: Targets - operating margin*
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Original
Moderate+
year 2 ofSupercharge
NewH1
+180bps
H2Moderate expansion
+
*Adjusted to exclude the impact of exceptional items
Q&A
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Appendices
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Analysis of Exceptional costs
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Total P&L Total P&L Total cash
Guidance HY 2016 to date to date
£m £m £m £m
Acquisition, integration and restructuring 390 19 244 189
Litigation provisions 210 - 210 142
Korea “HS” 300 300 300 7
Reconciliation of Operating Profit to AdjustedOperating Profit
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HY HY2016 2015
£m £m
Operating profit 762 939
Adjusting items:Korea HS issue 300 -Acquisition, integration and restructuring 19 14
Adjusted operating profit 1,081 953
Revenue growth by Business segment Q2 2016
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LFL Acq/Disp FX Reported
% % % %
North America 3% - 6% 9%
Rest of ENA 1% -2% 4% 3%
Total ENA 2% -1% 4% 5%
DvM 8% - -1% 6%
FOOD 5% - 6% 10%
Group 4% -1% 3% 6%
Due to rounding this table will not always cast
Revenue growth by Business segment H1 2016
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LFL Acq/Disp FX Reported
% % % %
North America 2% 0% 6% 7%
Rest of ENA 3% -2% 2% 4%
Total ENA 3% -1% 3% 5%
DvM 9% 0% -4% 4%
FOOD 4% 0% 5% 9%
Group 5% -1% 1% 5%
Due to rounding this table will not always cast
Reconciliation in net debt
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2016£m
Opening net debt (1,620)Free cashflow 939Shares purchased (400)Shares reissued 61Purchase of businesses (42)Dividends paid (625)Exchange and other movements 109
Closing net debt (1,578)